* Q2 sales up 1.9 pct to 3.61 bln vs cons 3.49 bln
* Q2 operating profit at 46 mln euros, 1.3 pct of sales
* Net loss widens on mobile writedown, cash burn persists
* R&D partnership with Qualcomm on small cells
* Qualcomm to take below 5 pct stake in Alcatel-Lucent
* Shares up 8.8 pct
By Leila Abboud
PARIS, July 30 Struggling telecom equipment
maker Alcatel-Lucent surfed on strong growth in its
key U.S. market to beat analysts' estimates and said mobile chip
maker Qualcomm would buy a minority stake as part of a
In the first full quarter under a new Chief Executive Michel
Combes, the smaller competitor to Sweden's Ericsson
and China's Huawei posted a quarterly sales rise of 1.9
percent to 3.61 billion euros ($4.78 billion).
Demand for so-called IP products, which help direct data
traffic inside telecom networks, grew sharply and pushed up
profits, supporting Combes' decision to put them at the centre
of his strategy to deliver a rebound that has eluded his
But recovery at Alcatel-Lucent, which has lost more than $10
billion since it was created through a 2006 merger, will depend
in part on whether telecom operators increase overall spending
in the coming years to build superfast mobile broadband or if
they trim budgets elsewhere to compensate.
Alcatel-Lucent will have to duke it out with its bigger
competitors, including Nokia-Siemens Networks and Ericsson, for
Adjusted operating profit was 46 million euros or 1.3
percent of revenues. Analysts had predicted losses.
Shares in Alcatel-Lucent were up 8.8 percent at 0748 GMT.
Combes said he would seek three to five partnerships like
the Qualcomm deal in a bid to increase Alcatel's R&D firepower.
The U.S. chip maker will take a less than 5 percent stake, he
said, and the pact is worth some 100 million euros in research
"Other discussions are underway... we hope to make
announcements on in the coming quarters," said Combes.
Despite investors' euphoria, the group's second-quarter
results were marked by a net loss of 871 million euros caused by
a writedown of its sub-scale wireless business.
And Alcatel-Lucent consumed more cash - 248 million euros -
in its operations than it generated, a perennial problem for the
Alexandre Peterc, analyst at Exane BNP Paribas, said the
quarterly results could lead to upgrades to consensus but
cautioned that investors should avoid the risky stock.
"Alcatel shares remain extremely risky and volatile," said
Peterc in a note. "Though Q2 is good, beating consensus, cash is
still worsening faster than anticipated."
In June, Combes pledged to focus the group on high-growth
products in IP networking and high-mobile and fixed broadband,
while maximising profits out of older products.
One billion euros of unspecified asset sales and a billion
of cost cuts are also slated through 2015.
The deal with Qualcomm, which will be worth roughly 100
million euros in research spending, is to develop miniature base
stations known as small cells.
Telecom operators are increasingly layering these tiny base
stations on to their networks to boost wireless coverage over a
range of 10 to 200 metres.
Operators like AT&T and Vodafone are deploying
small cells to ease pressure on networks groaning with mobile
data traffic from customers accessing the Internet via
smartphones and tablets.
Telecoms consultant Informa predicted the deployment of
public small cells would generate 2016 revenues of $16.2 billion